Although a number of growth factors have been shown to be involved in neurogenesis, the role of inflammatory cytokines remains relatively unexplored in the normal brain. Here we investigated the effect of interferon gamma (IFNgamma) in the regulation of neural precursor (NP) activity in both the developing and the adult mouse brain. Exogenous IFNgamma inhibited neurosphere formation from the wild-type neonatal and adult subventricular zone (SVZ). More importantly, however, these effects were mirrored in vivo, with mutant mice lacking endogenous IFNgamma displaying enhanced neurogenesis, as demonstrated by an increase in proliferative bromodeoxyuridine-labeled cells in the SVZ and an increased percentage of newborn neurons in the olfactory bulb. Furthermore, NPs isolated from IFNgamma null mice exhibited an increase in self-renewal ability and in the capacity to produce differentiated neurons and oligodendrocytes. These effects resulted from the direct action of IFNgamma on the NPs, as determined by single-cell assays and the fact that nearly all the neurospheres were derived from cells positive for major histocompatibility complex class I antigen, a downstream marker of IFNgamma-mediated activation. Moreover, the inhibitory effect was ameliorated in the presence of SVZ-derived microglia, with their removal resulting in almost complete inhibition of NP proliferation. Interestingly, in contrast to the results obtained in the adult, exogenous IFNgamma treatment stimulated neurosphere formation from the embryonic brain, an effect that was mediated by sonic hedgehog. Together these findings provide the first direct evidence that IFNgamma acts as a regulator of the active NP pool in the non-inflammatory brain.